Super’s looking healthier again

The Australian Prudential Regulation Authority released its annual report into the superannuation industry last month showing Australians are pouring money back into super at near record rates.

About $117.5 billion flowed into superannuation last financial year, the second highest amount recorded, while 35,276 new self-managed super funds were set up in 2011-12 – a significant increase of 26 per cent on the 28,031 new funds established in 2010-11.

The total number of SMSFs rose by 8 per cent to 478,263.

The latest APRA data paints an encouraging picture at a time when there’s renewed optimism for a global economic recovery. Last year the S&P/ASX 200 Index was up 13.4 per cent.

The average balanced super fund returned 11 per cent.

Last month, asset consultant Mercer also released its 2012 performance league tables, showing that funds which invested in low-risk, high-yielding shares were the best performers. Last year the median Australian equities fund manager recorded a 20.3 per cent gain, narrowly outperforming the Index by 0.6 per cent before fees.

Still that result was in sharp contrast to 2011 when the average fund lost 10.4 per cent.

Equity income funds, which focus on companies that pay high dividends, were the best performers in the Australian equities category.

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International equities managers also had a good year, returning an average of 15 per cent. But the subdued performance of defensive assets – including residential property, which delivered less than 3 per cent, Australian bonds, which returned around 8 per cent, and cash, which only returned 4 per cent – highlight the importance of asset allocation. Nathan MacPhee, chief executive of SuperRatings, says asset allocation has the biggest impact on performance.

The Australian Taxation Office shows the average SMSF has a 31 per cent allocation to cash and term deposits, compared with mainstream funds, which hold between 5 and 8 per cent in cash.

Although portfolios with a high allocation to cash would have outperformed over the last five years, in the last year, when equity markets rose, they would have suffered slightly, MacPhee says.

The Mercer figures also highlight the importance of choosing fund managers with skill and experience.

Perpetual’s wholesale ethical fund topped the tables with 39.7 per cent followed by the BlackRock Equitised Long Short Fund, the Perpetual Share-Plus Fund and the Tyndall Concentrated Income Fund.

Similarly, APRA named the worst performing super funds, with the Bookmakers Super Fund falling 5 per cent last financial year while the top fund, the Retail Employees Superannuation Trust, was up 0.85 per cent and the median super fund on the SuperRatings Balanced Fund Index returned 0.45 per cent.

The Bookmakers Super Fund has been a consistent underperformer, losing 11 per cent year-on-year for the last five years. Not far behind was Australian Christian Super, which fell 5.4 per cent for the last five years to June 30, 2012.